August 22, 2010

The famous opening line from Charles Dickens' classic "A Tale of Two Cities," set in 18th-century Europe, would appear to be an appropriate description of the opportunities and challenges currently facing wineries in the towns of Southold and Riverhead.

On the one hand, the outlook for the Long Island wine region has never been better. Our producers are now receiving the recognition they deserve for creating wines of exceptional quality. Important critics are routinely giving our products high ratings. Last year a coalition of the most prestigious wine regions in the world recruited Long Island to become the first and only region on the East Coast to join their alliance to protect the top geographical wine designations.

This growing acknowledgment of our region's new prominence in the wine world would normally be a cause for local pride and celebration, but it is clear that not everyone shares the enthusiasm. Unfortunately, there is now growing pressure for Southold and Riverhead towns to adopt new rules that would severely restrict winery events, removing a crucial source of revenue, particularly in the current economic climate.

Because of the scale and cost of wine production on Long Island, tasting room sales are critical to the survival of our local industry. Although some producers are successfully generating wholesale business around the metropolitan area and building direct shipping revenue through such means as wine clubs, tasting room sales still account for a significant percentage of a producer's revenue. Over the past two years, the ratio may have become even more pronounced as wineries' restaurant sales suffered during the recession while tourism to the region continued to grow.

Clearly, direct marketing activities -- both public and private -- at local wineries have helped spur tourism on the North Fork. However, the rising number and variety of events have raised questions about whether certain activities should be allowed, and if they should, under what circumstances. Some people have suggested that wineries are moving beyond their original agricultural focus to become shadow restaurants, catering halls, concert venues, etc. They also argue that since wineries benefit from agricultural tax exemptions, they are competing unfairly with non-agricultural businesses that offer similar services.

Both claims are wrong.

New York State understands that small farms, including vineyards, need to be able to engage in direct marketing activities to help generate product sales. These practices are promoted and protected in several sections of New York State's Agriculture and Markets Law. The interpretation of what constitutes direct marketing and agri-tourism is both broad and open-ended, as long as farm product sales remain the primary objective. Moreover, certain activities, such as serving food to complement wine tastings, are expressly permitted under the State's Alcoholic Beverage Control Law .

The contention that wineries are somehow not paying their fair share of taxes is also false. Notwithstanding the fact that wine is the only agricultural product subject to excise taxes, it is true that vineyard owners, like farmers of any other crops, can apply for annual exemptions on land in active agricultural production. All farmers can also receive a 10-year exemption on new farm structures, such as barns. But the land and buildings used for winery facilities and tasting rooms, where the controversial agri-tourism activities generally take place, do not receive any favorable tax treatment. Indeed, the Southold assessor's office recently confirmed that not only are Southold wineries subject to the same rules on winery and tasting room buildings as govern any other business, but wineries also pay more -- in some cases substantially more -- than local businesses that are claiming unfair competition.

The trend toward small-scale artisanal processing of local crops and the growing popularity of agri-tourism have had a major impact on the viability of farming on the East End and certainly on the overall economy of the North Fork. Rather than deal a potentially devastating blow to the viability of our newly prominent wine region by restricting direct marketing activities, Southold and Riverhead towns should welcome and encourage such activities by adopting clear policies that enable local farm operations to adapt effectively to economic circumstances and respond to market demands.

Editor's Note: This piece ran as an op-ed in the 8/19 issue of Suffolk Times.

Comments

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Firstly, a great post. And yes, as Lenn pointed out, there is growing friction between local town businesses and wineries, not only in Long Island, but in NJ, MD, and VA as well.

Several wineries have attempted to try new promotions, well within the legal mandates of tastingrooms, in order to increase their revenue streams.

For municipal board members and towns folk, this tact by other businesses, who claim wineries are some how not paying their fair share of the tax burden is ludicrous. Wineries are taxed like no other business, and that state (both as excise tax and retail sales tax) and the federal government are squeezing them more and more.

Well done Ron and Steve. And Lenn for posting it here.
Two other points are worth making:

1. What should the wineries do to win this battle.
2. For wineries to be successful in the long term, they need to get past this model and work on the image of the wine we produce.

Here are some details regarding the above:

While we may win the argument, we may also loose the battle. In order to prevail we need public opinion to be on our side as well. We can far better influence Town Governments when the community is pulling with us. The corollary is also true: while we may be right as detailed by Ron and Steve, if the community is against us the politicians will farm that negativity better than we can argue the merits of our case.

Long ago I have advocated that we need to have a positive community relations program and be mindful of the impact of our success on the lives of our neighbors. For example for the few weddings that are perormed at Paumanok every Summer, we have instituted in the 90s a curfew after 10 pm when any amplified music must be turned off. This is out of respect for our neighbors, in the event the sound carries over that night.

We also offer an extra 10% discount to all our neighbors from Jamesport and Aquebogue.

Similarly we should evaluate whether there may be any other solution to activities that may affect the quality of life of our neighbors. This includes such things as traffic on week ends, not running tractors or diesel engines powering pumps after 8 pm. Some of this applies to all farms not just vineyards.

The industry can play a positive role in encouraging a dialogue with the community and another role in working with Town governments in helping design practical solutions to real or perceived problems.
It is far better to be part of the solution than to be part of the problem.

When wineries organize harvest festivals the theme can be very wine centric if activities inclue observation of the harvest and wine making activities, the tasting of fermenting wines and such things thatfit with that theme. But is it necessary to include, let us say, magicians and fortune tellers?

As to the current wave of events at wineries which are triggering much of the negative responses that Ron and Steve are properly challenging, the question to be asked has to do with the effectiveness of such events and their residual impact on the image of Long Island Wine.

It has become rather common to read ads of events at wineries where the event is the draw, not the wine. Events attract traffic and that is good for business. Is this also good for the image of the wine? What is the residual in someone's mind after having visited a winery, induced by the content of the event where the wine tasting or consumption was only accessory to the event?
It does not project an image of confidence about our wine when we have to create a circus atmosphere in order to sell wine based on volume rather than have wine centric events where the wine is the star and any entertainement is accessory to the wine tasting experience.

If we organize a particular wine and food pairing such as Oysters and Chenin Blanc it is totally to showcase our Chenin Blanc. That we may have on occasion a duo play some elegant music in the background is an added touch. But we do not advertize it as a music event.

Where wineries have used their creativity at orchestrating interesting events that in reality have little to do with wine and more to do with increasing traffic at the winery there is a strong chance that the residual is negative regarding its impact on the image of LI Wine. In the long term if we end up getting more known for our events rather than for the quality of our wine, then we only will have ourselves to blame for having lacked the foresight to have anticipated the consequences of our actions.

In fact the case for a positive image for LI Wine is perhaps the most important issue that I invite Steve and Ron to exercise their leadership on. The stronger the image of our wines the better it will sell and the more likely it will command the price it deserves. The road to profitability is after all in seeing that our principal product, wine, sells as well as it can at the highest price possible. For that we need to grow demand. And to grow demand we need to improve our image. An image that LI Wine is about quality and as delicious as they come. No circus required.

Thanks to Steve Bate and Ron Goerler Jr. we have some of the most effective leadership that our industry has ever had. That leadership is best evidenced by the unity of spirit and purpose among the growers and producers on Long Island.

Our winery community of owners, winemakers, vineyard managers, field workers and tasting room staff continue to show great stewardship of the farming industry on Long Island. The jobs that have been created and sustained through a worldwide economic downturn are a tribute to the progressive way we all conduct our business.

If our industry is going to thrive for the next generation, we will need to work more effectively with our leaders in Town Hall. New code legislation is needed to ease the restrictive codes that have slowed our industries ability to create new jobs for our community.

The opportunity to make real and positive change in Southold Town and Riverhead Town is now. We should all work together on drafting code language that creates a more progressive and sustainable community.

I find myself in agreement with Charles almost all of time, but not in this case sadly:

"Where wineries have used their creativity at orchestrating interesting events that in reality have little to do with wine and more to do with increasing traffic at the winery there is a strong chance that the residual is negative regarding its impact on the image of LI Wine."

I totally disagree with this sentiment. Agri-tainment and Agri-tourism are an important trend all over the country, especially in times of recession. It is a valuable tool to preserve farms and farm land and a culture of farming in certain areas. To suggest that bringing tourists and locals alike out to a farm for any reason could be a negative seems incorrect. To further suggest that there need be no entertainment other than basking in the exquisite quality of Long Island wine is to ignore human nature. Not all of our customers subscribe to Wine Spectator or are "wine-geeks" like us. Some come to be entertained, or enlightened, but all come for the experience. If all we had was a tour of steel tanks and barrel rooms at each of the 40 wineries, then everyone could stop at Paumonock having had the only experience they need, turn around and go home, saying "Done that..."

"In the long term if we end up getting more known for our events rather than for the quality of our wine, then we only will have ourselves to blame for having lacked the foresight to have anticipated the consequences of our actions."

Charles makes a false argument in favor of wine quality over events. I can't seem to draw a straight line from an event that brings a thousand people to your winery and your wine quality actually suffering for it. Even Ice Cream trucks use music to attract attention - how else are you going to find them? I can however, draw a straight line from higher traffic to higher volume of sales to higher wine quality, quite easily.

Charles makes a lucid and totally valid point in his final paragraph however, that is undeniable. Quality attracts attention, and while not all attention-seekers deserve it, some of us do have something they want to show off. I try to get the message of quality out to anyone who will listen. And to that end, I have been very successful.

David - I completely agree with your call to work for change in Town Hall. Southold wine producers already operate under the most restrictive code for farm wineries in the entire State of New York. In this economy and with our industry continuing to provide jobs and stimulating local tourism, we need our town government to work with us - not against us.

The fact is we already have overwhelming public support - both from our neighbors and from our partners in the business community. This latest attention from Town Hall comes predominantly from the rantings of a single restaurateur - who also happens to be related to the Town Supervisor. Such is the sad state of small town politics.

Charles I also agree with your sentiments surrounding events. We should always be about quality wine production first and foremost. The problem is if your winery was located in Southold Town, your oyster and wine event would not be in compliance with town code and you would be served a cease and desist letter. This is where we need the code to be clarified and expanded to allow our businesses to continue to thrive.

Lenn-
Thanks for posting the article that Steve & I wrote. It addresses the point that our townships seem to be missing. As president of the LIWC, it is my position to make sure that we have equal representation across the board & the more people we have involoved, the stronger the message.

Because Charles has not been a member of the LIWC for several years, he is unaware that we have a strong backing in our community. The Wine Council is currently working with both towns and looking at better ways to make sure that we can grow with the changes that are taking place on the North Fork.

This issue is not just about the wineries like some would like to think it is, but rather about agriculture as a whole. Agriculture cannot be defined in a dictionary - you are working the land and if you truly understand the word, then you must be willing to adapt as the need arises and that is what we are doing. The word TERRIOR means a geographical region; the lay of the land. But it has a greater meaning to me. Its about the people who grow the grapes, the people who make the wine and most importantly, the people who visit our area and consume the wine. That's where Charles misses the mark. People are choosing to visit the North Fork to be a part of the wine experience. We are looking to provide them with a positive experience; quality service, education and fine wines for which we do not necessarily have to charge the highest price possible.

At Jamesport, we have been running events for several years with the wine as the main focus. Our goal is to be sure that those attending are genuinely satisfied. Did I give them a memorable time? If I did, then they will return with their friends and the message grows about Long Island wine.

With 48 members of the LIWC, it is necessary that each winery devise a unique way of attracting their customer base. It is not for me to say if one model works better than another. What matters is that people are visiting the wineries in record numbers and that should be our focus.As a whole our industry is up in down economy.

Retail sales is where we make the longest dollar, isn't it? Where we need to be careful is that we don't allow the towns to take away the excitement of running a retail business.

Finally, I take great pride in what I have done for the last 30 years & believe that Long Island wines do have a positive image, thanks to the hard work of those working in our industry. The road to creating demand for our wines is paved by working together and giving people a positive experience, complete with high quality wines.